SEC Filing | Nurix Therapeutics, Inc.

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nrix-10q_20210531.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39398

NURIX THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware		27-0838048
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
1700 Owens Street, Suite 205 San Francisco, CA		94158
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (415) 660-5320

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

NRIX

Nasdaq Global Market

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 9, 2021, the Registrant had 44,426,856 shares of common stock, $0.001 par value per share, outstanding.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements concerning our business strategy and plans, future operating results and financial position, as well as our objectives and expectations for our future operations, are forward-looking statements.

In some cases, you can identify forward-looking statements by such terminology as “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect” and similar expressions that convey uncertainty of future events or outcomes, although not all forward-looking statements contain these words. Forward-looking statements include, but are not limited to, statements about:

•

the timing of our planned investigational new drug application (IND) submissions for our lead drug candidates and other drug candidates;

•

the timing and conduct of our clinical trial programs for our lead drug candidates NX-2127, NX-1607, NX-5948, DeTIL-0255 and other drug candidates, including statements regarding the timing of initiation of the clinical trials;

•

the timing of, and our ability to obtain, marketing approvals for our lead drug candidates NX-2127, NX-1607, NX-5948, DeTIL-0255 and other drug candidates;

•

our plans to pursue research and development of other drug candidates;

•

the potential advantages of our DELigase platform and our drug candidates;

•

the extent to which our scientific approach and DELigase platform may potentially address a broad range of diseases;

•

the potential benefits of our arrangements with Sanofi S.A. and Gilead Sciences, Inc.;

•

the timing of and our ability to obtain and maintain regulatory approvals for our drug candidates;

•

the potential receipt of revenue from future sales of our drug candidates;

•

the rate and degree of market acceptance and clinical utility of our drug candidates;

•

our estimates regarding the potential market opportunity for our drug candidates;

•

our sales, marketing and distribution capabilities and strategy;

•

our ability to establish and maintain arrangements for the manufacturing of our drug candidates;

•

the impact of the ongoing coronavirus (COVID-19) pandemic on our business, clinical trials, financial condition, liquidity and results of operations;

•

the potential achievement of milestones and receipt of royalty payments under our collaborations;

•

our ability to enter into additional collaborations with third parties;

•

our intellectual property position;

•

our estimates regarding expenses, future revenues, capital requirements and needs for additional financing;

•

the impact of government laws and regulations; and

•

our competitive position.

We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, prospects, and financial needs. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. We disclaim any intention or obligation to publicly update or revise any forward-looking statements for any reason or to conform such statements to actual results or revised expectations, except as required by law.

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive (Income) Loss	3
	Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)	4
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	31
PART II.	OTHER INFORMATION	32
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	80
Item 3.	Defaults Upon Senior Securities	80
Item 4.	Mine Safety Disclosures	80
Item 5.	Other Information	80
Item 6.	Exhibits	81
SIGNATURES		82

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

NURIX THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)

	May 31,			November 30,
	2021			2020
Assets
Current assets:
Cash and cash equivalents	$	188,207		$	119,356
Short-term investments		197,814			161,792
Accounts receivable		2,537			—
Contract assets		—			7,500
Income tax receivable		3,142			3,846
Prepaid expenses and other current assets		4,581			5,940
Total current assets		396,281			298,434
Long-term investments		110,440			90,890
Property and equipment, net		8,345			6,672
Restricted cash		170			170
Other assets		2,745			177
Total assets	$	517,981		$	396,343
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	5,405		$	3,412
Accrued and other current liabilities		7,678			8,328
Deferred revenue, current		33,761			32,799
Total current liabilities		46,844			44,539
Deferred revenue, net of current portion		72,122			60,685
Other long-term liabilities		837			850
Total liabilities		119,803			106,074
Commitments and contingencies (Note 6)
Stockholders’ equity (deficit):
Preferred stock, $0.001 par value— 10,000,000 shares authorized as of May 31, 2021 and November 30, 2020; 0 shares issued and outstanding as of May 31, 2021 and November 30, 2020		—			—
Common stock, $0.001 par value— 500,000,000 shares authorized as of May 31, 2021 and November 30, 2020; 44,403,547 and 38,864,872 shares issued and outstanding as of May 31, 2021 and November 30, 2020, respectively		44			39
Additional paid-in-capital		552,459			393,841
Accumulated other comprehensive income		30			87
Accumulated deficit		(154,355	)		(103,698	)
Total stockholders’ equity		398,178			290,269
Total liabilities and stockholders’ equity	$	517,981		$	396,343

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

NURIX THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

(unaudited)

	Three Months Ended May 31,						Six Months Ended May 31,
	2021			2020			2021			2020
Collaboration revenue	$	7,091		$	4,182		$	12,102		$	7,046
Operating expenses:
Research and development		25,994			14,142			48,997			27,109
General and administrative		7,511			3,270			14,041			5,720
Total operating expenses		33,505			17,412			63,038			32,829
Loss from operations		(26,414	)		(13,230	)		(50,936	)		(25,783	)
Interest and other income, net		171			223			489			396
Loss before income taxes		(26,243	)		(13,007	)		(50,447	)		(25,387	)
Provision (benefit) for income taxes		139			(20,587	)		210			(20,576	)
Net income (loss)	$	(26,382	)	$	7,580		$	(50,657	)	$	(4,811	)
Net income (loss) per share attributable to common stockholders, basic	$	(0.60	)	$	—		$	(1.23	)	$	(1.32	)
Weighted-average number of shares outstanding, basic		43,804,066			3,731,838			41,318,281			3,636,140
Net income (loss) per share attributable to common stockholders, diluted	$	(0.60	)	$	—		$	(1.23	)	$	(1.32	)
Weighted-average number of shares outstanding, diluted		43,804,066			4,909,829			41,318,281			3,636,140

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

NURIX THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)

	Three Months Ended May 31,					Six Months Ended May 31,
	2021			2020		2021			2020
Net income (loss)	$	(26,382	)	$	7,580	$	(50,657	)	$	(4,811	)
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale investments		(19	)		82		(57	)		141
Total comprehensive income (loss)	$	(26,401	)	$	7,662	$	(50,714	)	$	(4,670	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

NURIX THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share amounts)

(unaudited)

	Redeemable convertible preferred stock				Common stock					Additional paid-in		Accumulated other comprehensive			Accumulated			Total stockholders’ equity
	Shares		Amount		Shares			Amount		capital		income (loss)			deficit			(deficit)
Balance as of November 30, 2019		12,813,887	$	48,195		3,595,334		$	4	$	2,740	$	(2	)	$	(60,456	)	$	(57,714	)
Exercise of stock options		—		—		72,570			—		37		—			—			37
Repurchase of unvested early exercised stock options		—		—		(867	)		—		—		—			—			—
Vesting of early-exercised stock options		—		—		—			—		31		—			—			31
Stock-based compensation		—		—		—			—		176		—			—			176
Unrealized gain (loss) on available-for-sale investments		—		—		—			—		—		59			—			59
Net income (loss)		—		—		—			—		—		—			(12,391	)		(12,391	)
Balance as of February 29, 2020		12,813,887		48,195		3,667,037			4		2,984		57			(72,847	)		(69,802	)
Issuance of Series D redeemable convertible preferred stock at $12.75 per share, net of issuance costs of $336		9,431,364		119,914		—			—		—		—			—			—
Exercise of stock options		—		—		125,708			—		118		—			—			118
Vesting of early-exercised stock options		—		—		—			—		22		—			—			22
Stock-based compensation		—		—		—			—		474		—			—			474
Unrealized gain (loss) on available-for-sale investments		—		—		—			—		—		82			—			82
Net income (loss)		—		—		—			—		—		—			7,580			7,580
Balance as of May 31, 2020		22,245,251	$	168,109		3,792,745		$	4	$	3,598	$	139		$	(65,267	)	$	(61,526	)

	Redeemable convertible preferred stock				Common stock					Additional paid-in		Accumulated other comprehensive			Accumulated			Total stockholders’ equity
	Shares		Amount		Shares			Amount		capital		income (loss)			deficit			(deficit)
Balance as of November 30, 2020		—	$	—		38,864,872		$	39	$	393,841	$	87		$	(103,698	)	$	290,269
Exercise of stock options		—		—		190,825			—		394		—			—			394
Repurchase of unvested early exercised stock options		—		—		(971	)		—		—		—			—			—
Vesting of early-exercised stock options		—		—		—			—		40		—			—			40
Issuance under Employee Stock Purchase Plan		—		—		64,589			—		1,043		—			—			1,043
Stock-based compensation		—		—		—			—		2,700		—			—			2,700
Unrealized gain (loss) on available-for-sale investments		—		—		—			—		—		(38	)		—			(38	)
Net income (loss)		—		—		—			—		—		—			(24,275	)		(24,275	)
Balance as of February 28, 2021		—		—		39,119,315			39		398,018		49			(127,973	)		270,133
Issuance of common stock in connection with equity offering, net of offering costs of $643		—		—		5,175,000			5		150,152		—			—			150,157
Exercise of stock options		—		—		109,232			—		241		—			—			241
Vesting of early-exercised stock options		—		—		—			—		104		—			—			104
Stock-based compensation		—		—		—			—		3,944		—			—			3,944
Unrealized gain (loss) on available-for-sale investments		—		—		—			—		—		(19	)		—			(19	)
Net income (loss)		—		—		—			—		—		—			(26,382	)		(26,382	)
Balance as of May 31, 2021		—	$	—		44,403,547		$	44	$	552,459	$	30		$	(154,355	)	$	398,178

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

NURIX THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Six Months Ended May 31,
	2021			2020
Cash flows from operating activities
Net loss	$	(50,657	)	$	(4,811	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		1,288			986
Stock-based compensation		6,644			650
Net amortization (accretion) of premium (discount) on investments		566			50
Changes in operating assets and liabilities:
Contract assets		7,500			—
Accounts receivable		(2,537	)		—
Income tax receivable		704			(19,590	)
Prepaid expenses and other assets		(837	)		(2,056	)
Accounts payable		2,119			1,745
Deferred revenue		12,399			51,454
Accrued and other liabilities		(671	)		(1,885	)
Net cash (used in) provided by operating activities		(23,482	)		26,543
Cash flows from investing activities
Purchases of investments		(183,238	)		(29,640	)
Sales of investments		6,994			—
Maturities of investments		119,681			9,857
Purchases of property and equipment		(2,934	)		(1,977	)
Net cash used in investing activities		(59,497	)		(21,760	)
Cash flows from financing activities
Proceeds from issuance of redeemable convertible preferred stock, net of offering costs		—			119,914
Proceeds from issuance of common stock, net of offering costs		150,157			—
Proceeds from exercise of stock options		631			177
Repurchase of unvested early exercised stock options		(1	)		(1	)
Proceeds from issuance under Employee Stock Purchase Plan		1,043			—
Payments of deferred offering costs		—			(360	)
Net cash provided by financing activities		151,830			119,730
Net increase in cash, cash equivalents and restricted cash		68,851			124,513
Cash, cash equivalents and restricted cash at beginning of period		119,526			34,986
Cash, cash equivalents and restricted cash at end of period	$	188,377		$	159,499

Supplemental disclosures of non-cash investing and financing activities:
Additions to property and equipment included in accounts payable and accrued liabilities	$	607		$	927
Vesting of early exercised stock options	$	144		$	53
Deferred offering costs included in accounts payable and accrued liabilities	$	—		$	916

	As of May 31,
	2021			2020
Reconciliation of cash, cash equivalents, and restricted cash as shown in the statements of cash flows:
Cash and cash equivalents	$	188,207		$	159,329
Restricted cash		170			170
Total cash, cash equivalents and restricted cash	$	188,377		$	159,499

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

NURIX THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization

Description of Business

Nurix Therapeutics, Inc. (the Company) previously known as Nurix, Inc., was incorporated in the state of Delaware on August 27, 2009 and is headquartered in San Francisco, California. The Company is a biopharmaceutical company focused on the discovery, development and commercialization of small molecule therapies designed to modulate cellular protein levels as a novel treatment approach for cancer and other challenging diseases. Leveraging the Company’s expertise in E3 ligases together with its proprietary DNA-encoded libraries, the Company has built DELigase, an integrated discovery platform to identify and advance novel drug candidates targeting E3 ligases, a broad class of enzymes that can modulate proteins within the cell. The Company’s drug discovery approach is to either harness or inhibit the natural function of E3 ligases within the ubiquitin-proteasome system to selectively decrease or increase cellular protein levels to treat disease.

The Company wholly owns a subsidiary, DeCART Therapeutics Inc. (DeCART), which was incorporated in the state of Delaware on June 22, 2020 and which holds a license to three of the Company’s compounds, including NX-0255, for drug-enhanced isolation of T cells exclusively with respect to three CAR-T therapy targets.

Initial Public Offering

On July 23, 2020, the Company’s registration statement on Form S-1 (File No. 333-239651) relating to its initial public offering (IPO) of common stock became effective. The IPO closed on July 28, 2020 at which time the Company issued 11,000,000 shares of its common stock at a price to the public of $19.00 per share. In addition, the underwriters exercised their option to purchase an additional 1,550,000 shares of the Company’s common stock on July 31, 2020, and this transaction closed on August 4, 2020. Immediately prior to the closing of the IPO, all outstanding shares of the Company’s redeemable convertible preferred stock automatically converted into 22,245,251 shares of common stock. Net proceeds from the IPO, including the exercise of the underwriters’ option to purchase additional shares, were $218.1 million, after deducting underwriting discounts and commissions of $16.7 million and expenses of $3.6 million.

Subsequent to the closing of the IPO, there were no shares of preferred stock outstanding. In connection with the closing of the IPO, the Company restated its Restated Certificate of Incorporation to change the authorized capital stock to 500,000,000 shares designated as common stock, and 10,000,000 shares designated as preferred stock, all with a par value of $0.001 per share.

Follow-on Offering

In March 2021, the Company completed a follow-on offering and issued 5,175,000 shares of common stock (including the exercise by the underwriters of their option to purchase an additional 675,000 shares of common stock) at a price to the public of $31.00 per share for net proceeds of approximately $150.1 million, after deducting underwriting discounts and commissions of $9.6 million and expenses of $0.7 million.

Liquidity

The Company’s operations have historically been financed through the issuance of common and redeemable convertible preferred stock and proceeds received under the Company’s collaboration and license agreements. Since inception, the Company has generally incurred significant losses and negative net cash flows from operations. During the six months ended May 31, 2021, the Company incurred a net loss of $50.7 million and had negative net cash flows from operating activities of $23.5 million. The Company had an accumulated deficit of $154.4 million as of May 31, 2021 and will require substantial additional capital for research and development activities. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of its drug candidates currently in development. As of May 31, 2021, the Company had cash, cash equivalents and investments of $496.5 million.

Management believes that its cash, cash equivalents and investments are sufficient to continue operating activities for at least 12 months following the issuance date of these condensed consolidated financial statements. Future capital requirements will depend on many factors, including the timing and extent of spending on research and development and payments the Company may receive under its collaboration agreements with Sanofi S.A. (Sanofi) and Gilead Sciences, Inc. (Gilead) or future collaboration agreements, if any. There can be no assurance that, in the event the Company requires additional financing, such financing will be available at terms acceptable to the Company if at all. If additional capital is not available, failure to generate sufficient cash flows from operations, raise additional capital and reduce discretionary spending could have a material adverse effect on the Company’s ability to achieve its intended business objectives.

2. Summary of Significant Accounting Policies

Basis of Presentation

The Company’s condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. The Company’s condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair statement of the Company’s financial position as of and for the three and six months ended May 31, 2021. The condensed consolidated balance sheet as of November 30, 2020 was derived from the audited annual financial statements as of that date. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from these interim financial statements. These interim financial statements and related disclosures have been prepared with the presumption that users of the interim financial statements have read or have access to the audited annual financial statements for the preceding fiscal year. Accordingly, these financial statements should be read in conjunction with the audited annual financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended November 30, 2020, as filed with the SEC. These interim results are not necessarily indicative of results to be expected for the full fiscal year or any future interim period.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of Nurix Therapeutics, Inc. and its wholly owned subsidiaries, including DeCART. All intercompany balances and transactions have been eliminated in consolidation.

Reverse Stock Split

On July 17, 2020, the Company filed an amendment to the Company’s amended and restated certificate of incorporation to effect a reverse split of shares of the Company’s common stock and redeemable convertible preferred stock, each on a 1-for-3 basis (reverse stock split). The par value and authorized shares of the common stock and redeemable convertible preferred stock were not adjusted as a result of the reverse stock split. All issued and outstanding common stock, options to purchase common stock and per share amounts contained in the condensed consolidated financial statements have been retroactively adjusted to give effect to the reverse stock split for all periods presented.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates, including those related to the useful lives of long-lived assets, the measurement of stock-based compensation, accruals for research and development activities, income taxes and revenue recognition. The Company bases its estimates on historical experience and on other relevant assumptions that are reasonable under the circumstances. Actual results could differ materially from those estimates.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents and investments. The Company’s investments consist of debt securities issued by highly rated corporate entities, the U.S. federal government or state and local governments. The Company’s exposure to any individual corporate entity is limited by policy. Deposits may, at times, exceed federally insured limits, but minimal credit risk exists. The Company invests its cash equivalents in highly rated money market funds. The Company has not experienced any credit losses on its deposits of cash and cash equivalents.

Other Risks and Uncertainties

The Company is subject to a number of risks similar to other early-stage biopharmaceutical companies, including, but not limited to, changes in any of the following areas that the Company believes could have a material adverse effect on its future financial position or results of operations: risks related to the successful discovery and development of its drug candidates, ability to raise additional capital, development of new technological innovations by its competitors and delay or inability to obtain drug substance and finished drug product from the Company’s third-party contract manufacturers necessary for the Company’s drug candidates, including due to the impact of the current coronavirus (COVID-19) pandemic, protection of intellectual property rights, litigation or claims against the Company based on intellectual property rights and regulatory clearance and market acceptance for any of the Company’s products candidates for which the Company receives marketing approval.

Moreover, the current COVID-19 pandemic, which is impacting worldwide economic activity, poses the risk that the Company or its employees, contractors, suppliers and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities. The extent to which the

COVID-19 pandemic will impact the Company’s business will depend on future developments that are highly uncertain and cannot be predicted at this time.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The extent to which the COVID-19 pandemic may directly or indirectly impact the Company’s financial statements is highly uncertain and subject to change. Management considered the potential impact of the COVID-19 pandemic on its estimates and assumptions and there was not a material impact to the Company’s condensed consolidated financial statements as of and for the three and six months ended May 31, 2021; however, actual results could differ from those estimates and there may be changes to management’s estimates in future periods.

The Company relies on single source manufacturers and suppliers for the supply of its drug candidates. Disruption from these manufacturers or suppliers would have a negative impact on the Company’s business, financial position and results of operations.

Revenue Recognition

The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To recognize revenue from a contract with a customer, the Company performs the following five steps:

(i)

identify the contract(s) with a customer;

(ii)

identify the performance obligations in the contract;

(iii)

determine the transaction price;

(iv)

allocate the transaction price to the performance obligations in the contract; and

(v)

recognize revenue when (or as) the Company satisfies a performance obligation.

At contract inception, the Company assesses the goods or services promised within each contract, whether each promised good or service is distinct, and determines those that are performance obligations. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when or as the performance obligation is satisfied.

The Company enters into collaboration agreements under which it may obtain upfront payments, milestone payments, royalty payments and other fees. Promises under these arrangements may include research licenses, research services, including selection campaign research services for certain replacement targets, the obligation to share information during the research and the participation of alliance managers and in joint research committees, joint patent committees and joint steering committees. The Company assesses these promises within the context of the agreements to determine the performance obligations.

Research and collaboration licenses: If a license is determined to be distinct from the other promises identified in the arrangement, the Company recognizes revenue from upfront payments allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring proportional performance for purposes of recognizing revenue from non-refundable, upfront payments. The Company evaluates the measure of proportional performance each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Milestone payments: At the inception of each arrangement that includes research, development, or regulatory milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price. The Company uses the most likely amount method for research, development and regulatory milestone payments. Under the most likely amount method, an entity considers the single most likely amount in a range of possible consideration amounts. If it is probable that a significant revenue reversal would not occur, the associated milestone amount is included in the transaction price.

Sales-based milestones and royalties: For arrangements that include sales-based milestone or royalty payments based on the level of sales, and in which the license is deemed to be the predominant item to which the sales-based milestone or royalties relate to, the Company recognizes revenue in the period in which the sales-based milestone is achieved and in the period in which the sales associated with the royalty occur. To date, the Company has not recognized any sales-based milestone or royalty revenue resulting from its collaboration arrangements.

Customer options: Customer options, such as options granted to allow a licensee to extend a license or research term, to select additional research targets or to choose to research, develop and commercialize licensed compounds are evaluated at contract inception to determine whether those options provide a material right (i.e., an optional good or service offered for free or at a discount) to the customer. If the customer options represent a material right, the material right is treated as a separate performance obligation at the outset of the arrangement. The Company allocates the transaction price to material rights based on the standalone selling price. As